Final answer:
The ending balance at December 31, 2018, for Foucault's investment account in Mango Inc. should be $494,000, calculated by adding the share of net income to the beginning balance and subtracting the dividends received.
Step-by-step explanation:
The subject question deals with accounting for an investor's share in the net income and dividends of a company in which it holds a significant stake. Foucault Company owns 40,000 shares of Mango Inc., which is 40% of Mango Inc. Since Mango Inc. earned $640,000 during 2018, the 40% share of Foucault Company in these earnings would be $256,000 (40% of $640,000). Furthermore, Foucault Company would receive 40% of the cash dividends paid by Mango Inc., amounting to $192,000 (40% of $480,000). To find the ending balance of Foucault's investment account, we need to add this share of net income to the beginning balance and subtract the dividends received, as they are a return on investment.
The calculation would be as follows:
Beginning balance: $430,000
Plus: Share of net income (40% of $640,000): $256,000
Less: Dividends received (40% of $480,000): $192,000
Ending balance: ($430,000 + $256,000 - $192,000) = $494,000.
Therefore, the correct answer is A. $494,000.